B-148469, APRIL 12, 1962, 41 COMP. GEN. 671

B-148469: Apr 12, 1962

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IS NOT AUTHORIZED. THE ADVANTAGES OF THE PLAN PENDING OBTAINING SPECIFIC LEGISLATIVE AUTHORITY COULD BE REALIZED BY RESERVING FROM THE APPROPRIATION AN AMOUNT COVERING EACH ITEM TRANSFERRED TO BE USED FOR REPLACEMENT PURPOSES OR TO BE TRANSFERRED TO MISCELLANEOUS RECEIPTS UPON DETERMINATION THAT NO REPLACEMENT IS TO BE MADE. 1962: THIS IS IN RESPONSE TO YOUR LETTER OF MARCH 20. THE PROPOSED PLAN AND REASONS IN SUPPORT OF ITS PROPRIETY ARE DEVELOPED IN YOUR LETTER ESSENTIALLY AS FOLLOWS: THE PUBLIC HEALTH SERVICE OF YOUR DEPARTMENT PROCURES MEDICAL SUPPLIES AND EQUIPMENT FOR THE CIVIL DEFENSE MEDICAL STOCKPILE (50 U.S.C. THE DEFENSE CENTER IS GENERALLY RESPONSIBLE FOR CONTROLLING MEDICAL SUPPLIES AND EQUIPMENT FOR THE MILITARY SERVICES.

B-148469, APRIL 12, 1962, 41 COMP. GEN. 671

DEPARTMENTS AND ESTABLISHMENTS - SERVICES BETWEEN - EXCHANGE OF DISSIMILAR ITEMS A PLAN FOR INTERAGENCY EXCHANGE OF MEDICAL SUPPLY ITEMS, SUCH AS THE EXCHANGE OF DRUGS BY THE PUBLIC HEALTH SERVICE FOR DENTAL CHAIRS OF THE DEFENSE MEDICAL SUPPLY AGENCY, WITHOUT REPLACEMENT OF THE DRUGS OR TRANSFER OF AN EQUIVALENT AMOUNT TO THE TREASURY AS MISCELLANEOUS RECEIPTS AS REQUIRED BY SECTION 601 OF THE ECONOMY ACT, 31 U.S.C. 686, TO PRECLUDE THE AUGMENTATION OF APPROPRIATIONS, WOULD NOT ONLY BE THE DISPOSAL OF EXCESS ITEMS IN THE STOCKPILE WITHOUT PROPER ACCOUNTING FOR THE PROCEEDS BUT WOULD BE THE PURCHASE OF CHAIRS FOR DRUGS RATHER THAN FOR MONEY; THEREFORE, THE PLAN WHICH MAY NOT BE APPROVED SHOULD BE SUBMITTED TO THE CONGRESS FOR THE PURPOSE OF OBTAINING SPECIFIC AUTHORIZING LEGISLATION. ALTHOUGH A PLAN FOR EXCHANGE OF MEDICAL SUPPLY ITEMS BETWEEN THE DEPARTMENT OF HEALTH, EDUCATION, AND WELFARE AND THE DEPARTMENT OF DEFENSE WHICH WOULD PERMIT THE EXCHANGE OF DRUGS FOR MEDICAL EQUIPMENT WITHOUT REPLACEMENT OF THE DRUGS OR DEPOSIT OF AN APPROPRIATE AMOUNT INTO THE TREASURY AS MISCELLANEOUS RECEIPTS AS REQUIRED BY SECTION 601 OF THE ECONOMY ACT OF JUNE 30, 1932, 31 U.S.C. 686, IS NOT AUTHORIZED, THE ADVANTAGES OF THE PLAN PENDING OBTAINING SPECIFIC LEGISLATIVE AUTHORITY COULD BE REALIZED BY RESERVING FROM THE APPROPRIATION AN AMOUNT COVERING EACH ITEM TRANSFERRED TO BE USED FOR REPLACEMENT PURPOSES OR TO BE TRANSFERRED TO MISCELLANEOUS RECEIPTS UPON DETERMINATION THAT NO REPLACEMENT IS TO BE MADE.

TO THE SECRETARY OF HEALTH, EDUCATION, AND WELFARE, APRIL 12, 1962:

THIS IS IN RESPONSE TO YOUR LETTER OF MARCH 20, 1962, CONCERNING WHETHER A PROPOSED PLAN FOR EXCHANGES OF MEDICAL SUPPLIES AND EQUIPMENT BETWEEN YOUR DEPARTMENT AND THE DEPARTMENT OF DEFENSE MAY PROPERLY BE INSTITUTED UNDER THE PROVISIONS OF SECTION 601 OF THE ECONOMY ACT, AS AMENDED, 31 U.S.C. 686. THE PROPOSED PLAN AND REASONS IN SUPPORT OF ITS PROPRIETY ARE DEVELOPED IN YOUR LETTER ESSENTIALLY AS FOLLOWS:

THE PUBLIC HEALTH SERVICE OF YOUR DEPARTMENT PROCURES MEDICAL SUPPLIES AND EQUIPMENT FOR THE CIVIL DEFENSE MEDICAL STOCKPILE (50 U.S.C. APP. 2281 (H) ( THROUGH THE DEFENSE MEDICAL SUPPLY CENTER OF THE DEFENSE SUPPLY AGENCY, DEPARTMENT OF DEFENSE. THE DEFENSE CENTER IS GENERALLY RESPONSIBLE FOR CONTROLLING MEDICAL SUPPLIES AND EQUIPMENT FOR THE MILITARY SERVICES, MAINTAINING STOCKS OF SOME ITEMS FOR ISSUE WHEN NEEDED AND SUPPLYING OTHER ITEMS ON A PROCUREMENT WHEN NEEDED BASIS. ORIGINALLY THE CIVIL DEFENSE PLAN CALLED FOR A STOCKPILE OF MEDICAL SUPPLIES WHICH IT WAS BELIEVED WOULD BE NEEDED IN GREAT AMOUNTS IN THE EVENT OF AN ENEMY ATTACK ON THIS COUNTRY; A FEW YEARS AGO THE BASIC PLAN WAS REVISED TO PREPOSITION, IN VARIOUS PLACES THROUGHOUT THE COUNTRY, COMPLETE EMERGENCY HOSPITALS WHICH COULD BE SET UP AND RUN IN A MATTER OF HOURS. AS A RESULT OF THIS CHANGE, THERE DEVELOPED A DISPROPORTION OF ITEMS NEEDED FOR OUTFITTING ADDITIONAL HOSPITALS, SOME ITEMS BEING IN SHORT AND OTHERS IN LONG SUPPLY. HOWEVER, THE ULTIMATE PROJECTED NEED OF STOCKPILED ITEMS OR OF PROPOSITIONED HOSPITALS HAS NOT BEEN MET.

IN ORDER TO EFFECT ECONOMIES UNDER THESE CIRCUMSTANCES, THE PUBLIC HEALTH SERVICE AND THE DEFENSE MEDICAL SUPPLY CENTER WOULD EXCHANGE LISTS OF ITEMS WHICH EACH AGENCY HAD, AT THE PARTICULAR TIME, IN LONG SUPPLY OR AVAILABLE FOR ROTATION. THE PUBLIC HEALTH SERVICE WOULD THEN ORDER FROM THE DEFENSE MEDICAL SUPPLY CENTER LIST THOSE ITEMS WHICH IT NEEDED. DEFENSE MEDICAL SUPPLY CENTER WOULD MAKE KNOWN ITS NEEDS FROM THE PUBLIC HEALTH SERVICE LIST. A CREDIT IN FAVOR OF THE SHIPPING AGENCY WOULD BE ESTABLISHED ON THE BOOKS OF BOTH AGENCIES IN THE AMOUNT OF THE VALUES OF THE ITEM FURNISHED. AT PERIODIC INTERVALS THE CREDITS ON THE BOOKS OF EACH AGENCY WOULD BE OFFSET AGAINST EACH OTHER, AND PAYMENT BY CHECK WOULD BE MADE BY THE AGENCY OWING A BALANCE TO THE OTHER. REIMBURSEMENT RECEIVED BY THE PUBLIC HEALTH SERVICE WOULD BE USED ONLY TO REPLACE PREVIOUSLY EXCHANGED STOCKS OF MEDICAL SUPPLIES AND EQUIPMENT WITH NEW MEDICAL SUPPLIES AND EQUIPMENT, BUT NOT NECESSARILY THE EXACT ITEMS EXCHANGED.

SECTION 601 OF THE ECONOMY ACT, AS AMENDED, READS, IN PERTINENT PART, AS FOLLOWS:

(A) ANY EXECUTIVE DEPARTMENT * * * OR OFFICE THEREOF, IF FUNDS ARE AVAILABLE THEREFOR AND IF IT IS DETERMINED BY THE HEAD OF SUCH EXECUTIVE DEPARTMENT * * * OR OFFICE TO BE IN THE INTEREST OF THE GOVERNMENT SO TO DO, MAY PLACE ORDERS WITH ANY OTHER SUCH DEPARTMENT * * * OR OFFICE FOR MATERIALS, SUPPLIES, EQUIPMENT, WORK OR SERVICES OF ANY KIND THAT SUCH REQUISITIONED FEDERAL AGENCY MAY BE IN A POSITION TO SUPPLY OR EQUIPPED TO RENDER, AND SHALL PAY PROMPTLY BY CHECK TO SUCH FEDERAL AGENCY AS MAY BE REQUISITIONED, UPON ITS WRITTEN REQUEST, EITHER IN ADVANCE OR UPON THE FURNISHING OR PERFORMANCE THEREOF, ALL OR PART OF THE ESTIMATED OR ACTUAL COST THEREOF AS DETERMINED BY SUCH DEPARTMENT * * * OR OFFICE AS MAY BE REQUISITIONED; BUT PROPER ADJUSTMENTS ON THE BASIS OF THE ACTUAL COST OF THE MATERIALS, SUPPLIES, OR EQUIPMENT FURNISHED, OR WORK OR SERVICES PERFORMED, PAID FOR IN ADVANCE, SHALL BE MADE AS MAY BE AGREED UPON BY THE DEPARTMENTS, * * * OR OFFICES CONCERNED * * *.

(B) AMOUNTS PAID AS PROVIDED IN SUBSECTION (A) OF THIS SECTION SHALL BE CREDITED * * * IN THE CASE OF PAYMENTS OTHER THAN ADVANCE PAYMENTS, TO THE APPROPRIATIONS OR FUNDS AGAINST WHICH CHARGES HAVE BEEN MADE PURSUANT TO ANY SUCH ORDER, EXCEPT AS HEREINAFTER PROVIDED. * * * WHERE MATERIALS, SUPPLIES, OR EQUIPMENT ARE FURNISHED FROM STOCKS ON HAND, THE AMOUNTS RECEIVED IN PAYMENT THEREFOR SHALL BE CREDITED TO APPROPRIATIONS OR FUNDS, AS MAY BE AUTHORIZED BY OTHER LAW, OR, IF NOT SO AUTHORIZED, SO AS TO BE AVAILABLE TO REPLACE THE MATERIALS, SUPPLIES, OR EQUIPMENT, EXCEPT THAT WHERE THE HEAD OF ANY SUCH DEPARTMENT * * * OR OFFICE DETERMINES THAT SUCH REPLACEMENT IS NOT NECESSARY THE AMOUNTS PAID SHALL BE COVERED INTO THE TREASURY AS MISCELLANEOUS RECEIPTS. ( ITALICS SUPPLIED.)

(C) ORDERS PLACED AS PROVIDED IN SUBSECTION (A) OF THIS SECTION SHALL BE CONSIDERED AS OBLIGATIONS UPON APPROPRIATIONS IN THE SAME MANNER AS ORDERS OR CONTRACTS PLACED WITH PRIVATE CONTRACTORS * * *.

YOUR QUESTION ARISES IN CONNECTION WITH THE UNDERSCORED LANGUAGE OF SECTION 601 REQUIRING PROCEEDS FROM TRANSFERS UNDER THE ACT TO OTHER GOVERNMENT AGENCIES TO BE EITHER USED FOR REPLACING ITEMS TRANSFERRED OR COVERED INTO THE TREASURY AS MISCELLANEOUS RECEIPTS. DOES "TO REPLACE THE MATERIALS, SUPPLIES, AND EQUIPMENT" MEAN ONLY TO REPLACE THE EXACT ITEMS PREVIOUSLY PURCHASED, THAT IS, AN ITEM FOR ITEM REPLACEMENT, OR MAY IT BE CONSTRUED MORE BROADLY AS THE REPLACEMENT OF ANY MEDICAL MATERIALS, SUPPLIES, AND EQUIPMENT WITHIN THE GENERAL AREA COVERED BY THE APPROPRIATION, THAT IS, AN APPROPRIATION OR "PROGRAM" REPLACEMENT? YOU POINT OUT THAT IF THE PHRASE REQUIRES REPLACEMENT OF EXACT ITEMS, SUCH AS, FOR EXAMPLE, BANDAGES FOR BANDAGES, THE ECONOMY ACT WOULD PROVIDE NO ADVANTAGE, BUT THAT IF THE PHRASE MAY BE CONSTRUED SO AS TO PERMIT REPLACING MEDICAL STOCKPILE ITEMS WITH OTHER MEDICAL STOCKPILE ITEMS, FOR EXAMPLE, REPLACING BANDAGES WHICH ARE IN LONG SUPPLY, WITH SUTURES WHICH ARE IN SHORT SUPPLY, THE ECONOMY ACT WOULD PROVIDE AMPLE AUTHORITY FOR A MUTUALLY ADVANTAGEOUS EXCHANGE. AS A SPECIFIC EXAMPLE, YOU STATE THAT THE PUBLIC HEALTH SERVICE WOULD LIKE TO EXCHANGE, IMMEDIATELY ON RECEIPT OF A FAVORABLE OPINION, PENTOBARBITAL SODIUM TABLETS, 100 MG., IN 500S, FOR DENTAL OPERATING CHAIRS OF EQUIVALENT VALUE.

YOU CONTEND THAT THERE SHOULD BE WIDE ADMINISTRATIVE DISCRETION IN THE ROTATION OF MEDICAL STOCKPILE MATERIAL, SUPPLIES AND EQUIPMENT; THAT SINCE WIDE ADMINISTRATIVE DISCRETION HAS BEEN DELEGATED TO APPROPRIATE OFFICIALS IN THE CHOICE OF ITEMS TO BE STOCKPILED AND IN THEIR STORAGE, MAINTENANCE AND DISTRIBUTION, IT WOULD SEEM THAT WIDE LATITUDE FOR JUDGMENT SHOULD ALSO BE PERMITTED IN THE REPLACEMENT OF MEDICAL STOCKPILE ITEMS FROM FUNDS RECEIVED IN PAYMENT FOR MEDICAL SUPPLIES AND EQUIPMENT TRANSFERRED TO ANOTHER AGENCY. YOU CONTEND THAT THESE FUNDS SHOULD BE AVAILABLE FOR THE PURCHASE OF SUPPLIES AND EQUIPMENT MOST URGENTLY NEEDED OR MOST REASONABLY NEEDED AT THE TIME THE REIMBURSEMENT IS RECEIVED OR AT THE TIME REIMBURSEMENT MAY BE REOBLIGATED; THAT THE VALUE OF REDISTRIBUTION OR ROTATION OF STOCKS BETWEEN THE PUBLIC HEALTH SERVICE AND DEFENSE MEDICAL SUPPLY CENTER CANNOT BE OVEREMPHASIZED AND THE VALUE OF REDISTRIBUTION OR ROTATION IS GREATLY DIMINISHED IF ITEM-BY-ITEM REPLACEMENT IS TO BE REQUIRED, PARTICULARLY SINCE THE AREA WHERE THE GREATEST ECONOMIES COULD BE EFFECTED WOULD BE IGNORED, I.E., HIGHLY DETERIORATING VACCINES AND ANTIBIOTICS. YOU POINT OUT THAT RAPIDITY OF PROCUREMENT IS OFTEN AN IMPORTANT FACTOR IN THE CASE OF MEDICAL ITEMS; THAT THE ABILITY TO RELY ON THE STOCKS OF ANOTHER AGENCY OF THE GOVERNMENT WOULD PROMOTE PROMPT FULFILLMENT OF STOCK NEEDS; THAT OFTEN IT TAKES MANY MONTHS TO OBTAIN MEDICAL ITEMS BY CONTRACT; AND THAT IN MOST CASES TODAY NEW STOCKS ARE MORE EXPENSIVE THAN THOSE ALREADY IN STOCK.

IN CONNECTION WITH THE MATTER OF APPROPRIATIONS, YOU STATE THAT THE PROPOSED EXCHANGE PLAN WOULD NOT RESULT IN AN AUGMENTATION OF EITHER APPROPRIATION INVOLVED, SINCE FUNDS RECEIVED BY EITHER AGENCY WOULD GO TOWARD THE PROCUREMENT OF MEDICAL SUPPLIES AND EQUIPMENT WOULD GO TOWARD THE PROCUREMENT OF MEDICAL SUPPLIES AND EQUIPMENT OF EQUIVALENT COST AND IN NEITHER CASE CAN GOALS BE MET WITHIN LESS THAN PRESENT APPROPRIATIONS. MOREOVER, YOU POINT OUT, THE OVERALL VALUE OF THE STOCKS OF BOTH AGENCIES WOULD NOT DECREASE AS IS NOW THE CASE, BECAUSE REPLACEMENT OF DETERIORATING ITEMS WITH UPDATED ITEMS WOULD PREVENT SOME LOSSES NOW EXPERIENCED.

ALL OF THE ARGUMENTS FAVORING THE COMMON SENSE GOOD BUSINESS ASPECTS OF THE PROPOSED EXCHANGE PLAN ASIDE, THE PROPRIETY OF THE PLAN FROM A LEGAL STANDPOINT MUST REST, IN YOUR EXAMPLE, ON WHETHER IT MAY BE CONCLUDED THAT A PURCHASE OF DENTAL CHAIRS WITH THE PROCEEDS FROM TRANSFER OF AN EQUIVALENT AMOUNT OF DRUGS CONSTITUTES REPLACEMENT OF THE DRUGS. IF THE DRUGS WERE DETERMINED TO BE EXCESS TO STOCKPILE NEEDS, PROCEEDS FROM THEIR DISPOSAL WOULD, UNDER THE PROVISIONS OF SECTION 201 (J) OF THE FEDERAL CIVIL DEFENSE ACT OF 1950, AS AMENDED, 50 U.S.C. APP. 2281 (J), CLEARLY BE REQUIRED TO BE COVERED INTO THE TREASURY AS MISCELLANEOUS RECEIPTS. THE DRUGS (OR EQUIVALENT DRUGS) ARE NEVER RETURNED TO THE STOCKPILE, IT FOLLOWS THAT THEY WERE EXCESS TO STOCKPILE NEEDS WHEN TRANSFERRED, IN WHICH EVENT PROCEEDS OF THEIR DISPOSAL SHOULD PROPERLY HAVE BEEN RETURNED TO THE TREASURY. IT WOULD NOT APPEAR REASONABLE TO SAY THAT A NEED FOR DENTAL CHAIRS CONVERTS DRUGS WHICH ARE NO LONGER NEEDED IN THE STOCKPILE FROM EXCESS TO NONEXCESS PROPERTY. YOU STATE THOUGH, IN EFFECT, THAT THE TRANSFERRED DRUGS ARE NOT, IN FACT, EXCESS AND THAT EVENTUALLY THEY WILL BE REPURCHASED FOR THE STOCKPILE AT A TIME WHEN THE TOTAL ITEMS IN STOCK ARE IN BETTER BALANCE FOR SHORT TERM AS WELL AS LONG TERM NEEDS.

NOTWITHSTANDING THE STATEMENT THAT THE PROPOSED PLAN DOES NOT CONTEMPLATE TRANSFER OF EXCESS ITEMS, OPERATION OF THE PLAN WOULD ALLOW DISPOSAL OF EXCESS ITEMS WITHOUT PROPER ACCOUNTING FOR THEIR PROCEEDS. MOREOVER, WHILE IT MAY BE FULLY INTENDED TO REPURCHASE AT A LATER DATE AN ITEM TRANSFERRED UNDER THE PLAN, IF THAT ITEM IS NOT REPURCHASED OR REPLACED THERE IS NO JUSTIFICATION FOR FAILURE TO COVER THE APPLICABLE PROCEEDS INTO THE TREASURY. IN THE FINAL ANALYSIS, THE REQUIREMENT UNDER THE ECONOMY ACT FOR EITHER REPLACING ITEMS SOLD TO OTHER AGENCIES OR TREATING THE PROCEEDS AS MISCELLANEOUS RECEIPTS IS TO PRECLUDE AUGMENTATION OF THE APPROPRIATIONS INVOLVED. WHERE APPROPRIATED FUNDS ARE DISBURSED FOR AN ITEM OF SUPPLY OR EQUIPMENT AND THE PROCEEDS FROM SALE OF THAT ITEM ARE USED TO PURCHASE ANOTHER ITEM WHICH DOES NOT SERVE THE SAME PURPOSE AS WAS SERVED BY THE ITEM SOLD, IT IS CLEAR THAT UNLESS THE APPROPRIATION EVENTUALLY BEARS THE COST OF A REPLACEMENT FOR THE ITEM SOLD, THE APPROPRIATION WILL HAVE BEEN AUGMENTED IN THE AMOUNT OF FUNDS CONSERVED AT THE EXPENSE OF GOVERNMENT-OWNED PROPERTY. THE NET EFFECT OF TRANSFERRING DRUGS FOR DENTAL CHAIRS WITHOUT REPLACING THE DRUGS OR COVERING AN APPROPRIATE AMOUNT INTO THE TREASURY AS MISCELLANEOUS RECEIPTS IS THE PURCHASE OF CHAIRS FOR DRUGS RATHER THAN FOR MONEY. WE ARE NOT AWARE OF ANY AUTHORITY UNDER WHICH YOUR AGENCY MAY DISPOSE OF PROPERTY UNDER ITS CONTROL AS CONSIDERATION FOR OTHER PROPERTY IT DESIRES TO OBTAIN.

ACCORDINGLY, WE ARE OF THE OPINION THAT THE PLAN FOR EXCHANGE OF MEDICAL SUPPLY ITEMS AS PROPOSED IS NOT AUTHORIZED. RECOGNIZING THE GENERAL MERIT OF THE PROPOSAL, HOWEVER, WE RECOMMEND THAT THE MATTER BE PRESENTED TO THE CONGRESS FOR THE PURPOSE OF OBTAINING SPECIFIC AUTHORIZING LEGISLATION. AND ALTHOUGH WE HAVE CONCLUDED THAT THE PLAN AS PROPOSED IS NOT AUTHORIZED, WE WOULD POINT OUT THAT ADVANTAGES OF THE PLAN CAN POSSIBLY BE REALIZED ON AN INTERIM BASIS--- WHILE AWAITING CONGRESSIONAL ACTION--- BY A PROCEDURE, WHICH THOUGH IT MAY BE TOO BURDENSOME IN CONTINUED APPLICATION, MAY PROVE FEASIBLE ON A SHORT TERM BASIS. THE CONTEMPLATED PROCEDURE REQUIRES THAT FOR EACH ITEM OF MEDICAL STOCK TRANSFERRED, A CORRESPONDING AMOUNT OF THE APPROPRIATION BE RESERVED TO BE USED ONLY FOR REPLACEMENT OF THE ITEM TRANSFERRED. UPON A DETERMINATION THAT THE ITEM WILL NOT BE REPLACED, THE RESERVE FOR THAT ITEM WOULD BE ADJUSTED FROM THE APPROPRIATION TO MISCELLANEOUS RECEIPTS.